Concerns About Inflation?

[CharlieZulu]

Greetings all. Happy Sunday.

As I mentioned in my “Here I Am” post, every number points to our being ready to retire today. The biggest hold out for me is inflation.

I read post after post of folks who FIREd, and actually saw their portfolios recover and actually increase from the COVID shock. And mine is fully recovered too. I couldn’t be happier. Problem is that for the last decade-plus we had a largely Bull Market and low inflation. Both those conditions could change...and seem to be changing. Have we forgotten what it was like in the 70s?

No...not advocating for market timing or anything like that. But it is causing me to plan on sitting it out...in my job...a good job that I don’t “hate”...but I know that time is short.

I saw on the Sunday Morning Shows that people-who-should-know tend to agree that inflation will actually increase for the next couple quarters and then stay high for upwards of 18 months!!!! Areas impacted include travel...and my recent vacation bears that out. Travel is painfully pricey. DW and I want to travel a good bit after being FIREd...and to not have to worry *too* much about the cost.

FireCalc has me in a good place in every scenario...and I presume that includes the years in the late 70s and early 80s when we had double-digit inflation and a stagnated market. True?

Anybody else concerned...and maybe holding back from pulling the trigger until things calm down?

Thanks all!

 

[Dtail]

Greetings all. Happy Sunday.

As I mentioned in my “Here I Am” post, every number points to our being ready to retire today. The biggest hold out for me is inflation.

I read post after post of folks who FIREd, and actually saw their portfolios recover and actually increase from the COVID shock. And mine is fully recovered too. I couldn’t be happier. Problem is that for the last decade-plus we had a largely Bull Market and low inflation. Both those conditions could change...and seem to be changing. Have we forgotten what it was like in the 70s?

No...not advocating for market timing or anything like that. But it is causing me to plan on sitting it out...in my job...a good job that I don’t “hate”...but I know that time is short.

I saw on the Sunday Morning Shows that people-who-should-know tend to agree that inflation will actually increase for the next couple quarters and then stay high for upwards of 18 months!!!! Areas impacted include travel...and my recent vacation bears that out. Travel is painfully pricey. DW and I want to travel a good bit after being FIREd...and to not have to worry *too* much about the cost.

FireCalc has me in a good place in every scenario...and I presume that includes the years in the late 70s and early 80s when we had double-digit inflation and a stagnated market. True?

Anybody else concerned...and maybe holding back from pulling the trigger until things calm down?

Thanks all!

Bolded by me
True

 

[yhoomajor]

holding back from pulling the trigger until things calm down?

What if things don't calm down? Will you keep working? It's a semi-rhetorical question.
The way look at things is that ER gives you freedom to do things that one enjoys. If your job gives you joy. keep doing it.

Someone who retires at 50, is buying 25 years worth of freedom with their life's worth of hard-work (assuming that most people physically slow down after 75 significantly)

Someone who ERs at 55, is buying 20 years worth of freedom.
Someone who ERs at 60, is buying 15 years worth of freedom... and so on.

 

[Whisper66]

Not still working so in different situation than you. I'm living off just investment returns. I'm not concerned though am lowering my equity exposure a bit and moved fixed asset to inflation protected bond funds. And if things get bad we will just cut back expenses to whatever is needed.

 

[flyingaway]

Before worrying about inflation, we have been worrying about market performance. It now seems that the market had performed well for the past 10 years. We all have worried. You have to decide how much risk you want to take. Nobody knows the future for sure.

 

[W2R]

I am in my 12th year of retirement. I have been expecting runaway inflation for the past 15 years, and much to my amazement it hasn't happened yet. But, while anticipating inflation, I had plenty of time to think about how I'd handle it.

In retirement, we can't control the effect of inflation on earnings, but we can always cut back on spending somewhat until the economy recovers. That's my plan. I have a paid off house and car, and no debt, so I am not too worried about it.

That said, I am perfectly happy (extremely happy?) with an average middle class life as a retiree. So, this plan works for me but maybe not for everyone.

 

[ivinsfan]

You realize you have to take the good with the bad, right? IOW it can't all be perfect all the time. This reminds of when we were talking to a farming neighbor. Milk prices were high, grain prices were high, input costs were decent. Operating loans were a tad pricey but not too bad. And the crop growing season was excellent. After a second we all joked that if anything else good happened we might need to just drink the Koolaid as we'd never be satisfied again. And that's usually the way it goes.


You mention in Hi I am you have COLA pensions and a 2.25 interest rate on your home which is probably going up in value as I type.


If you want to RE then RE but keep in mind if you have a case of "one more year" there will always be a reason to keep working.

 

[RetiredHappy]

Greetings all. Happy Sunday.

I saw on the Sunday Morning Shows that people-who-should-know tend to agree that inflation will actually increase for the next couple quarters and then stay high for upwards of 18 months!!!!
Thanks all!

18 months? We wish. Inflation will go up for many years and until we know how to stop printing money freely, we are not going to get relief.

 

[NW-Bound]

... In retirement, we can't control the effect of inflation on earnings, but we can always cut back on spending somewhat until the economy recovers...

This.

On this forum, we have always talked about having some discretionary spending that we can cut.

If one retired with just enough for bare necessities and no discretionary spending, it could get rough anytime the market hiccups.

 

[RobbieB]

Anything could happen. Anything always could happen. Anything always will happen. Life happens.

Then you deal with it.

 

[ivinsfan]

Anything could happen. Anything always could happen. Anything always will happen. Life happens.

Then you deal with it.

Robbie you know this from personal experience. And inflation is a group problem not something that comes along and whacks you on the head causing personal loss.


OP you are in a much better position then a lot of people if inflation comes along.

 

[RAE]

You can always find a reason to work "one more year". If FIRECALC has you in a good place in every scenario, then don't worry about it. Life is short.........you can wait and wait for things to "calm down" and then realize later that you waited way too long.

 

[CharlieZulu]

Good point @RAE...and a consistent message I hear a lot. Thank you.

As to the point made about how inflation is a group problem, not an individual one. True. With regard to the point made about my being in a better place than most to deal with it, also true.

I never considered my FIRE journey....one DW and I started 30 years ago...to be about how we are doing vis-a-vis other people, but making sure that we are financially equipped to be ready for the known and the unknown, and live the life that we want to live. Every lifestyle choice or level has an associated price tag. Just trying to be “eyes wide open.”

I am an old military planner, so I can’t help myself Yes, anything can happen. Life will happen. But thinking through the “what ifs” still has its value. Thanks again.

 

[ivinsfan]

Good point @RAE...and a consistent message I hear a lot. Thank you.

As to the point made about how inflation is a group problem, not an individual one. True. With regard to the point made about my being in a better place than most to deal with it, also true.

I never considered my FIRE journey....one DW and I started 30 years ago...to be about how we are doing vis-a-vis other people, but making sure that we are financially equipped to be ready for the known and the unknown, and live the life that we want to live. Every lifestyle choice or level has an associated price tag. Just trying to be “eyes wide open.”

I am an old military planner, so I can’t help myself Yes, anything can happen. Life will happen. But thinking through the “what ifs” still has its value. Thanks again.

I'm not sure I understand. In fact you have two COLA pensions and a service connected VA payment is tax free. So there's that. My point is everyone will have to deal with inflation and thanks to your military service you have positioned yourself better much then most. Medical inflation is high and you don't need to concern yourself much with that issue. You have a house with a low interest rate and high equity. What else do you want?



You can't plan for the sudden death of a spouse or a life changing illness.

 

[CharlieZulu]

I'm not sure I understand. In fact you have two COLA pensions and a service connected VA payment is tax free. So there's that. My point is everyone will have to deal with inflation and thanks to your military service you have positioned yourself better much then most. Medical inflation is high and you don't need to concern yourself much with that issue. You have a house with a low interest rate and high equity. What else do you want?



You can't plan for the sudden death of a spouse or a life changing illness.

Very true in all cases. Planning for things and being prepared for them are 2 different things.

Please remember that I did not ask if what we want our retirement to look like is reasonable versus other people’s desires. The reasonableness of our desires is DW’s and my judgement alone.

I asked if the forum was concerned about inflation. You make a strong case that you are not and that I should not be either. Others also commented that they are not concerned. I appreciate your thoughts...truly.

 

[yhoomajor]

I asked if the forum was concerned about inflation. You make a strong case that you are not and that I should not be either. Others also commented that they are not concerned.

I wouldn't draw that conclusion. I don't think there is a consensus in the forum that folks are not worried about Inflation. Perhaps majority feels that way.. but then many here also have COLA pensions.

I'm worried about Inflation. It doesn't have to get to 70s/80s style or Zimbabwe style inflation before it starts punching us in our guts. But I would try not to base my ER decision on how high the Inflation is running. Rather I would control my expenses accordingly. And I don't even have Government pensions, let alone COLA pensions

 

[CharlieZulu]

I wouldn't make that conclusion. I don't think there is a consensus in the forum that folks are not worried about Inflation. Perhaps majority feels that way.. but then many here also have COLA pensions.

I'm worried about Inflation. It doesn't have to get to 70s/80s style or Zimbabwe style inflation before it starts punching us in our guts. But I would try not to base my ER decision on how high the Inflation is running. Rather I would control my expenses accordingly. And I don't even have Government pensions, let alone COLA pensions

Fair enough. The plan is to determine where to cut if/when it happens. I like that. Thank you.

 

[ivinsfan]

Very true in all cases. Planning for things and being prepared for them are 2 different things.

Please remember that I did not ask if what we want our retirement to look like is reasonable versus other people’s desires. The reasonableness of our desires is DW’s and my judgement alone.

I asked if the forum was concerned about inflation. You make a strong case that you are not and that I should not be either. Others also commented that they are not concerned. I appreciate your thoughts...truly.

I think you misunderstood me if you thought I made any kind of inference about how you spend or how much you spend..my comment about comparing to other people was strictly because of your two Cola pensions and your HC costs. I have no idea why you thought I was commenting on your lifestyle. You're confused But please don't put words in my mouth.

 

[CharlieZulu]

I have no idea why you thought I was commenting on your lifestyle. You're confused

I bit off on the “What else do you want,” in the earlier post. I took that the wrong way. Apologies. I see now that your point is that I have a solid degree of FI already, with built-in protections, and if I want to RE, then do it. Text chat has its limitations, but I own that misunderstanding. Again, thank you @ivinsfan. I appreciate your sticking to the chat versus just ignoring me.

 

[ivinsfan]

I bit off on the “What else do you want,” in the earlier post. I took that the wrong way. Apologies. I see now that your point is that I have a solid degree of FI already, with built-in protections, and if I want to RE, then do it. Text chat has its limitations, but I own that misunderstanding. Again, thank you @ivinsfan. I appreciate your sticking to the chat versus just ignoring me.

I'm an Army brat of a 20 year plus retired Dad and the wife of a Vietnam vet, I would never ignore a military vet

 

[Chuckanut]

Even a 4% inflation is a killer in the long run. Prices double every 18 years. For the FIRED group that could mean two doublings.

 

[ivinsfan]

Even a 4% inflation is a killer in the long run. Prices double every 18 years. For the FIRED group that could mean two doublings.

It depends on what you buy doesn't it? Right now I wouldn't want to be being a house. I know eating out is getting costlier every day.



We've have threads here about everyone's personal inflation rate..it's amazing how different the numbers are.


The problem is people who own houses think house price inflation is "good". No one every complains the stock market is inflating too fast either.


Anyone old farming story, when you rent farmland you think the rent is too high, then when you retire and rent out your own land you think it's too low..

 

[CharlieZulu]

Even a 4% inflation is a killer in the long run. Prices double every 18 years. For the FIRED group that could mean two doublings.

That pesky rule of 72. It could even be 2.5 doublings! Yikes!

 

[ivinsfan]

That pesky rule of 72. It could even be 2.5 doublings! Yikes!

Charlie did you read my post, everyone has their own inflation number...


Remember no one complains when their stock doubles.

 

[RobbieB]

Yup. I've seen 10% in 6 months with the restaurants due to the covid times even with takeout. Lots can't serve inside due to no help. I still tip 20%. Gotta help all you can!

And lumber...